Tepid M&A activity in quarter ending September 2011

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Mumbai, 19 September 2011 – According to EY's latest Transactions quarterly report, the M&A activity of Indian companies during the last quarter (July–September 2011) witnessed 158 deals, a decline of 14.1% as compared to the previous quarter (April–June 2011) during which the total deal count amounted to 184. The total disclosed deal value during the last quarter was US$5.2 billion, 26.6% lower than the previous quarter (US$7.1 billion). As compared to the same period last year (July–September 2010), deal value declined by 67.5% from US$16 billion, while deal count declined by 43% from 277 deals. Notably, the number of deals witnessed during July–September 2011 is the lowest deal count recorded in a quarter since 2009.

According to Ranjan Biswas, Partner and National Director, Transactions Advisory Services, EY, "M&A activity during the quarter continued to slow down on account of turmoil in the global economy, which was marked by fears of a debt crisis in Europe, slow-down in the US economy and declining investor confidence."

Cross-border deals outshone domestic deals in value

M&A activity during July–September 2011 was almost equally divided between domestic and cross-border deals. However, in terms of value, cross-border deals accounted for more than three-fourth of the quarter's total disclosed deal value. The previous quarter had witnessed similar kind of deals, when cross-border transactions dominated in terms of value.

Within cross-border deals, the last quarter recorded a total of 37 outbound deals (with a disclosed deal value of US$3 billion), representing a 71.1% share in terms of deal value. In terms of deal count, however, inbound deals outnumbered outbound ones by a slight margin. In the previous quarter, outbound deals exceeded inbound ones both in terms of deal count and value.

The last quarter saw corporate India carrying out a large number of outbound acquisitions in the US, making the country its most favored target destination. For the second consecutive quarter, Australia attracted the maximum investment from Indian companies, which amounted to a total disclosed value of US$1.26 billion. Notably,this deal value was contributed by a single deal.

US still the most acquisitive country

The US continued to make the largest number of acquisitions in India. Interestingly, maximum deals were recorded in the technology sector. The country entered 10 inbound deals with a total disclosed deal size of US$708.1 million. The largest inbound deal from the US was in the media and entertainment sector — Walt Disney Company's acquisition of a stake in UTV Software Communications for US$455.8 million.

Metals and mining sector topped in terms of deal value

Metals and mining sector, with deals worth US$1.9 billion, recorded maximum deal value during the last quarter. The increasing demand-supply gap in high-quality energy resources, especially coal, in India has resulted in a large number of companies turning to foreign energy resources. Out of the 14 deals witnessed in the sector, 10 were outbound in nature and almost the entire deal value of the sector was recorded from these deals. Moreover, the largest deal of the quarter — the GVK Coal Developer's (a GVK Group Company) acquisition of the Queensland coal assets of Australia-based Hancock Coal — also belonged to this sector.

Top five M&A deals for quarter ending September 2011

Deal

Value(US$ million)

Target

Target EY industry vertical

Acquirer

Percent sought (%)

Outbound

1,260.0

Queensland coal assets of Hancock Coal Pty Limited

Metals and mining

GVK Coal Developers Pte Ltd

-

Domestic

631.1

Vodafone Essar Limited

Telecommuni-cations

Piramal Healthcare Limited

-

Outbound

550.0

Golden Energy Mines PT

Metals and mining

GMR Holdings Private Limited

-

Outbound

510.3

Holidaybreak PLC

Travel

Cox & Kings Limited

100

Inbound

455.8

UTV Software Communications Limited

Media and entertainment

Walt Disney Company

-

Source: Thomson ONE Banker and EY analysis

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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.